Related Events

As it was for many companies that supply the auto industry, 2009 was a nightmare year for Alternative Engineering. An SBA-backed 7(a) loan helped Rob Rodriguez keep the small Grand Rapids business afloat after many manufacturing companies across America went bankrupt and most of the survivors shrank and/or severely curtailed their spending.

As it was for many companies that supply the auto industry, 2009 was a nightmare year for Alternative Engineering. An SBA-backed 7(a) loan helped Rob Rodriguez keep the small Grand Rapids business afloat after many manufacturing companies across America went bankrupt and most of the survivors shrank and/or severely curtailed their spending.

But 2011 was an excellent year, and now Alternative Engineering has moved into a new plant it bought last month on West River Drive in Plainfield Township, thanks to another SBA-backed loan from Lake Michigan Credit Union.

“SBA is the way to go,” said Rodriguez, who started his business in 1994. Prior to that, he had worked for General Motors as a mechanical engineer at the 36th Street stamping plant in Wyoming for four years, then worked another four years in sales for a tool-and-die shop in Grand Rapids.

Alternative Engineering was originally just Rodriguez, working out of his Grand Rapids home as an independent sales representative. With his engineer training and extensive hands-on experience in that field at General Motors, he soon began designing material-handling equipment to meet customers’ specific needs. Larger vendors like to make and sell the same thing to everybody, so Rodriguez found the niche for “specials” — custom-made, one-of-a-kind designs. He then had the special-order equipment built to his specifications, under subcontract by independent machine shops all over the state.

Eventually, Rodriguez launched his own small machine shop and soon had a small sales staff to help him sell and design products for industry — mainly the auto industry, with GM continuing to be his largest customer. All the rest were in southeast Michigan, too.

Rodriguez named his business Alternative Engineering because his products were the alternative to off-the-shelf equipment from established manufacturers. A customer would tell him what they wanted and Rodriguez could produce a quote to match — but then he typically offered the customer an alternative quote for a different concept that also would work but would cost less than what the customer thought was required.

“I was getting half the jobs I was quoting,” he said, which is a high success rate in the industrial world.

Alternative Engineering kept growing as the economy heated up — dangerously hot, as events would soon prove. In 2005, the company moved into a leased space on Broadway Avenue NW, off Richmond Street. Rodriguez had to invest in manufacturing equipment and, by then, there were about 25 people on his payroll.

Then came the disastrous year of 2009. “We almost went bankrupt,” he said. The severe downturn in the economy after Sept. 11, 2001, had sent Alternative Engineering close to failure. This downturn was even worse, however, because GM — “my biggest client” — went into bankruptcy.

The payroll kept shrinking at Alternative Engineering — down to about six employees, but Rodriguez hung on. At some point in 2011, it was clear that the vicious shakeout in U.S. industry was receding. Many factories had closed for good. Witness, for example, the empty site where Rodriguez once worked: the massive GM stamping plant that stood for more than 70 years on 36th Street in Wyoming.

Today, according to Rodriguez, the surviving factories in the U.S. are “at maximum capacity.”

“What are they going to do?” he asked, and then provided the answer: buy new equipment that enables them to handle increased production, which is right up Alternative Engineering’s alley.

The company found a good deal on a vacant piece of industrial property, the former Mattson Tool & Die Corp. on West River Drive, but there was a complication. Since the onset of the recession, and continuing to this day, “capital is a hard thing to find around here,” according to Rodriguez.

Mercantile Bank had been and still is his banker, he said. “Mercantile has been my bank forever, from day one. They’ve been a good bank to me.”

Like most banks, however, Mercantile “got nervous, with everyone else in 2009,” he said.

Rodriguez’s line of credit was cut to the bone, and reduced sales put him in a bind. The solution was an SBA-backed 7(a) loan for $350,000 from Mercantile to tide him over. In the process, he had to consolidate his loans, tighten his belt and prove over time that Alternative Engineering was going to make money and repay its debts.

Although Mercantile is still his bank, he said he turned to Lake Michigan Credit Union for the SBA 504 loan to buy the Mattson Tool & Die building. LMCU has been ramping up its business loan portfolio over the last three years.

SBA-backed 504 loans are for existing small businesses with a net worth of not more than $15 million and average net income of $5 million or less after federal taxes. They can be used to buy buildings or long-term machinery but cannot be used as working capital, for refinancing, or to buy inventory.

“We met every criteria,” said Rodriguez, adding he was impressed with the SBA officials with whom he met. He said he underwent “a very thorough interview,” and the SBA asked to see all the same documents any prudent bank would want to see from a prospective borrower during the application process.

In getting the earlier 7(a) loan, he also had to prove Alternative Engineering had a good track record and was well-run. It was a special 7(a) program, which used funds from the American Reinvestment and Recovery Act to reduce some of the loan costs, designed to “help stabilize operations during the economic downturn,” according to SBA.

For its part, the SBA is obviously confident that Alternative Engineering will do well and create more jobs. In August, Marie C. Johns, deputy administrator of the U.S. Small Business Administration, visited the company, which an SBA news release described as “a thriving Grand Rapids manufacturer.”

According to a recent announcement by the National Association of Development Companies, SBA-backed 504 loans to American small businesses made this month will be the largest monthly amount in the program’s 26-year history, a total of more than $548 million backed by SBA. NADCO is the trade association representing the nation’s 270 Certified Development Companies, which provide financing through the SBA 504 program. More than 130,000 businesses have obtained SBA 504 loans.

Rodriguez, who is the sole owner of Alternative Engineering, paid $900,000 for his new building, putting down $100,000. At 45,000 square feet, the West River Drive site has more than four times the usable space than the shop he had been leasing.

The 20-year-loan is at “an exceptionally low rate,” he added. “It’s hard to get a home mortgage for what I got this building for,” he said.

Now he can focus on bringing in more orders. He said he has begun expanding his sales efforts in markets beyond auto makers, such as food-processing companies and big box distributors of large volumes of retail goods.

But he’s not turning his back on the auto industry, and he said he has no worries about that industry’s future.

“Not at all,” said Rodriguez. “You have to get to work— you have to drive a car,” he said, and his connections with the auto industry assure him there is a “massive” backlog of demand for new cars.

Restricted Content

About GRBJ

Since 1983, the Grand Rapids Business Journal has been West Michigan's primary and most-trusted source of local business news. The weekly print edition of the Business Journal, a must-read for the area’s top decision-makers, is known as the business newspaper of metro Grand Rapids, Holland, Muskegon and all of West Michigan.

grbj.com provides the same trusted and objective business reporting that the Business Journal is known for -- plus real-time original content, timely enewsletters/alerts, exclusive blogs and more. Business Journal subscribers receive the weekly print edition, including bonus publications like the annual Book of Lists, and also complete access to all content on grbj.com.

The Grand Rapids Business Journal is published by Gemini Publications.